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Tag: Taxes

I have been quiet about this year’s election, but not for lack of caring. The last few months have been extremely busy for me; to my shame, my busy schedule has meant that I have been silent about what is likely the most important presidential election in more than 30 years, not to mention extremely important battles for control of Congress, many governorships, and thousands of other state and local elections.

The first and most important thing that I want to say is this: go vote. Voting for our executive, legislative, and — at the local level, anyway — many judicial and administrative offices is a huge part of what makes this country special. It made America unique at the time of her founding, and it still makes us unique today for the orderly, peaceful, and overwhelmingly honest and fair way in which we manage transitions of power. So, vote. Please. If you don’t, you can’t complain when whomever we elect does things you don’t like. Yes, you may still have the constitutional right to complain about it, but the choice not to vote is a choice to waive any moral right to whine about the outcome. At the very least, it waives any chance of the rest of us taking you seriously. If you care about how this country — or your state, or your city — is run, go vote.

As for my take on the election, well, I don’t expect to persuade anyone here and now, but I have to share my thoughts anyway, just in case.

I am a conservative first and foremost, in the tradition of Edmund Burke. My heroes are people like Ronald Reagan and Russell Kirk. In this post, if I can accomplish nothing else (beyond reminding you again to go vote), I hope to outline briefly why conservatism is the only safe choice for this election. I am not going to delve into social issues such as abortion, not because they are not important, but because, realistically, how we vote in this election has little to no impact on these issues.

Our nation is at great risk, due to years of inattention to the federal budget, a military with aging equipment and little new materiel coming online, and a foreign policy that is naive at best and timid, even spineless, at worst. Government increasingly intrudes upon the lives of average citizens, making it harder and harder to afford a good education; harder for our teachers, schools, and universities to pursue knowledge and learning rather than focusing first and foremost on the bottom line; harder to get and keep a good job; harder to start and run a business; and harder even to exercise everyday rights such as freedom of speech, freedom of religion, and freedom of conscience. Every new statute, rule, regulation, executive order, permit requirement, or other government action serves only to make government’s powers larger at the expense of the rights of the people. More startling still, those powers are increasingly concentrated in a national — not federal — government, of which, as Reagan warned, the states are becoming mere administrative districts. Our democratic federalism is dying, and it is being replaced by a monolithic, paternalistic government of bureaus, administrations, agencies, and czars.

The result is this: our official national debt is 16 trillion dollars — that’s $16,000,000,000,000 — and counting, or more than $51,000 per citizen. But the real story is far, far worse. By the standards that public companies must use (known as GAAP), the government has unfunded liabilities in excess of $120 trillion, or more than $1,058,000 per taxpayer. And it only gets worse; every time the government passes a “stimulus” package which fails to stimulate, engages in quantitative easing, or even repairs a pothole, that number — and your share of it — gets bigger. This is scary enough when we are only talking about legitimate functions of government, such as defense and administration of a justice system. But that’s not all we’re talking about; we are also buying countless handouts to private parties, pork-barrel projects, and a reality in which more people than ever are on food stamps, even as it gets harder for employers to offer good jobs due to the crushing regulatory and tax burdens they face.

To fund all of this, we are borrowing trillions of dollars from China, Japan, Brazil, Russia, Taiwan, Switzerland, and so on. Even worse: the single biggest creditor of the United States government is our own Social Security system, which, when combined with other federal pension systems, holds 5 trillion dollars in federal debt. Who will be left holding the bag for that? Our children and even my own generation, because the debt train will run out of track long before we reach retirement. We need to spend less. We need fiscal responsibility, but our elected officials don’t seem to have any.

Meanwhile, our military is weak. Our navy and coast guard have aging ships, and fewer of them than anytime in the last decades. The air force is flying old and increasingly obsolete planes, leaving us entirely dependent on drones to project air power; it’s not the same, and it’s not enough. The army drives vehicles that are ill-equipped for a world of IEDs and fighting wars in which the enemy does not always do us the courtesy of wearing uniforms. Our ever-faithful marines are underfunded, with all of the problems of the other forces. Our elected officials seem to think the military is an obsolete relic of a dangerous world that no longer exists, which we can always “turn on” again if the world becomes dangerous. Yet that same military is engaged in multiple undeclared wars and countless “peacekeeping” missions, even as our nation’s diplomatic representatives come under attack and die due to a lack of security. We need to maintain a strong defense, but we are at risk of losing it.

We need a foreign policy that other nations respect, even if they do not find it pleasant. There is a reason that President Obama has been endorsed for reelection by the likes of Putin, Chavez, and Castro, and it is not that they think he is strong. We need a president who recalls that he is President of the United States of America, not of the world, and who bows to no one.

Our country was founded on a simple idea: the people, not their rulers, are supreme. They have endowed the government with certain powers; the government has not bestowed upon the People the rights that they received from their Creator. The Founding Fathers gave us an intricate system, balancing the need for unity with the demands of individualism, local needs with national interests, and the need for a strong government with the even more important need that it never be too powerful. It’s time to reclaim their great idea, and restore a government of the people, by the people, and for the people, not of technocrats and career politicians, by the same, for the same.

It’s time for some real hope and change — hope for a stronger future, in which America is prosperous, strong, and free, and in which Americans do not fear their own government’s excesses. It’s time for a real conservative. Not a neoconservative who runs up our debt and needlessly engages in protracted wars, not a statist who sees government as the solution, but a Reaganite conservative who sees government for what it is: the problem, not the solution.

As in 2008, I am again endorsing Mitt Romney and other Republican candidates for office. Governor Romney is a proven leader and strong conservative, as is his running mate, Paul Ryan. They are merely men, with no pretensions to be more than men, but they are good men and proven leaders. I honestly believe that this presidential ticket is the most genuinely conservative ticket this country has seen since Reagan proclaimed that “it’s morning in America.” They are the right choice for America in this election cycle. When you vote, please vote for these proven leaders and all of the others who want to get this country back on track by restoring the proper balance between the People and their government.

I read an interesting article on economic mobility in National Review Online, which got me thinking. The article is good in that it points out some of the statistical challenges in measuring upward mobility. For example, who counts as poor? Who counts as middle class? Are we measuring intergenerational or intragenerational mobility? In acknowledging these questions, the article does well. Where the article falls short is in two key areas.

First, it assumes that upward mobility in the United States is lower than in many other countries. This may or may not be true, depending on how it is measured. For example, how much credit should be given to official statistics as reported by various countries? Certainly, focusing on the official “poverty” level will give bad results, as discussed here. But even using income percentiles poses challenges. For example, should welfare and other “benefits” in socialist European countries be counted as income? When I lived abroad, I routinely encountered people making more money than I did, for doing absolutely nothing. The individuals in question were not independently wealthy or trust-fund babies; they were merely beneficiaries of a very generous welfare state, which rewarded them for being unemployed and sitting around various public areas all day, which making no effort to find work. The artificial support given to such individuals may mask the natural cause-and-effect relationships between work and prosperity on the one hand and sloth and poverty on the other. The NRO article, like most discussions of economic inequality, also totally ignores wealth, focusing only on income. There are good reasons for this, chiefly the availability of data on income and lack thereof on wealth, but the distinction is still an important one and is totally ignored in the article in question.

The second and more significant failing is in the article’s assumption that increasing upward mobility is always a good thing. That’s not necessarily true. Certainly, increasing opportunities are always good, but one can easily imagine a very high-mobility society with an extremely dysfunctional economy. For example, imagine a tax system in which anyone whose parents were in the top 40% of the income distribution at the time of his or her birth pays a tax surcharge of 40% of his or her gross income, which funds are then distributed to those whose parents were in the lowest 40% of the income distribution. This would, at least temporarily, result in incredibly high mobility, but it would be manifestly unfair and strongly disincentivize anything resembling ambition or hard work. The point is that mobility is not the goal; opportunity is. Past a certain level, increased mobility can only be achieved at the cost of stability and fairness. For every person who moves up the income distribution, somebody else moves down, because rankings are a zero-sum game. Foster too much movement from the lower end of the distribution into the higher end, and you are by extension fostering an environment in which many of the highest earners suffer precipitous plunges in their incomes.

These are just some quick musings on the article; I would be curious to hear what others thought.

Like this:

A number of people have asked me lately what I’m reading on economics and the financial markets right now.Â Truth is, I’m always reading such things, and no short list can even come close to covering the variety of material I try to read, from the scholarly and serious (e.g., Posner, Becker, Mankiw, etc.) to the popular and light.Â That said, I thought my other readers might appreciate a list of some of what I’ve been looking at on the internet in the last few weeks, at least.Â Without commentary, opinion, analysis, or even a particular ordering (in fact, the first list was intentionally randomized), here it is.Â I express no public opinion on the accuracy, validity, merit, or usefulness of anything below; these are just links I have found interesting – in some cases because I think the contents to which I’m linking are totally wrong or even bordering on insane… but I think I’ll decline to say which ones.Â Read the material for yourself, if you’re interested – it’s more likely to be useful, that way, anyway.

Sites or people with lots of information in general, some good, some bad, some possibly crazy:

A report from the Office of the Comptroller of the Currency showing where things were last fall.

Flow of Funds report from the Federal Reserve.Â The table on page 2 is especially interesting.Â So is page 14, but page 15 is the best.Â In Q3 2007, the federal government accounted for 14% of total borrowing in the United States; in most quarters it’s around that or lower.Â In Q3 2008, it was 88.5%.Â In other words, nearly all of the credit extended to anyone for an entire three month period was extended to the federal government.Â Last year looks almost nothing like any other period in decades.

The idea is simple: our tax system uses marginal rates, meaning one rate applies to the first dollar earned and different rates kick in at different thresholds. (That is, unless you’re so economically productive or generous as to get stuck in the Alternative Minimum Tax system and get taxed at high flat rates.) The higher rate is called a marginal rate. This is the rate which applies to the last dollar a worker earns in a year. This rate is the rate which determines how much it’s worth to you to make the effort to earn that last dollar. If you’re acting rationally, it’s the rate which determines whether you take a second job, have a one- or two-income family, or start that business on the side you’ve been talking about.

Mankiw takes it one step further and asks how much he could leave for his kids out of that last dollar under each presidential candidate’s plan. You could do the same thing for any long period of time, of course, like saving for retirement or for your kid’s college education.

Like this:

As a math major, law school grad, and economic policy wonk, I’m not sure which aspect of this stupidity by the New York Times horrifies me most. Is it: that people think we do tax at those rates, that some people think we should, that no editor caught the logical flaws before publication, or that this kind of thing happens all the time in other circumstances and goes undetected more often than not?

Like this:

Economics professor Greg Mankiw shares some interesting thoughts, citing Paul Krugman, on why Bush’s tax cuts may result in smaller government in the next administration than we would get otherwise. This is likely true, no matter which candidate wins. Krugman, however, calls this a “poison pill,” a way of sabotaging a takeover or transfer of control, lamenting that, “looking at the tax proposals of the two presidential candidates, it’s remarkable and disheartening to see how effective President Bush’s fiscal poison pill has been in restricting the terms of debate.”

As Mankiw points out, though, the situation is not “entirely negative.” Indeed, for those of us who are classical liberals or – gasp – conservatives, a restricted debate in terms of how and how much the federal government can spend is not necessarily a bad thing. Tax increases of the type Obama plans will not cure deficit spending. This is true both because of something called a Laffer curve (higher tax rates do not always equal proportionally higher tax revenues, since capital often goes elsewhere or stops working) and because governments are greedy beasts – the more food you give them to cure their shortages, the bigger they get. This is why despite tripling tax revenues between 1932 and 1940, that period saw not a reduced deficit, but a 33% deficit growth.